TaxTMI 
TaxTMI 
2025 (1) TMI 892
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....024 2. We would first take up MA No.208/Mum/2024 pertaining to the Assessment Year 2002-03. The prayer clause of the aforesaid application reads as under: "11. In view of the above, the Applicant prays that the Hon'ble ITAT may be pleased to: (a) rectify the present order in accordance with the direction issued by this jurisdictional tribunal in Applicant's own case for AY 2001-02 and provide direction/clarification as sought by your Applicant with respect to recoveries made against securities losses for the AY 2002-03; (b) rectify the present order and allow ground No. 2 of the appeal following its Order dated 15.03.2024 for the AYs 2002-03 and 2003-04 without any direction for verification of undisputed facts by the learned AO; (c) pass such further or other orders as the facts and circumstances of the case may require; (d) grant costs of and incidental to this present application." 3. We have heard both sides and perused the material on record on this issue. 4. The first mistake apparent on record pointed out during the course of hearing was in relation to Ground No.6 raised by the Assessee in appeal for the Assessmen....
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....tion for the security losses. Therefore, considering the aforesaid order, during the course of hearing before the Tribunal, it was submitted that the Assessee did not wish to press Ground No.6 pertaining to non-taxability of recovery made against securities losses. It is submission of the Assessee that the Assessee had sought direction to the effect that in case the Department's appeal against the order, dated 27/07/2023, passed by the Tribunal for Assessment Year 1993-94 is allowed, then the Ld. Assessing Officer be directed not to tax the recoveries made against the said losses in AY 2002-03. However, the aforesaid direction was not given by the Tribunal and this constituted a mistake apparent on record. Accordingly, by way of the present rectification application the Assessee has sought the following directions: "In case, the Department succeed in its appeal before the Hon'ble High Court/Supreme Court in AY1993-94 that loss is not allowable in the said AY, then the Ld. AO be directed to not to tax the recoveries against the said securities losses in the AY under consideration." 4.2. We note that the Tribunal has disposed off the Ground No.6 raised by the Assessee....
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.... Paragraph 56 of the order dated 15/03/2024 reads as under: "56. It was held that the intra group services should have provided and such services must be at Arm's Length Price. As per OECD, allocation of cost based on approved allocation key and certified by the CPA certificate is relevant. The revenue cannot reject the CPA certificate since the same are specific and authenticated. As per Rule 10D(2)(A), the document must be supported by authentic documents, which includes authentication by the CPA. Therefore, the certification of allocation key and the same was authenticated by the CPA is proper documents as per Rule 10(2)(A) of the I.T. Rules. Respectfully following the above decision, we observe that in the given case also, the assessee has provided informations under Rule 10D(2)(A) and the cost allocation was also certified by the statutory auditors (CPA) of the Head Office and the service branches are submitted before tax authorities. However, this was not taken cognizance by the tax authorities. Therefore, we direct the Assessing Officer to verify the CPA certificate and verify the allocation key and relevant allocation of the cost to the Indian entity. Therefore, we....
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.... cost allocation for demonstrating the benefit derived by the Indian operations. Thus, TPO accepted cost allocation of INR.41.97 Crores without any adjustment whereas in relation to the balance cost allocation of INR.34.97 Crores the TPO concluded that the Assessee has failed to meet the benefit test and in the absence of details/supporting the benefit derived by the Indian operations could not be demonstrated by the Assessee. Therefore, the ALP for the 40% of cost allocation was determined as 'Nil' by the TPO and transfer pricing adjustment of INR.34.97 Crores was proposed. The Assessing Officer confronted the Assessee with the aforesaid transfer pricing adjustment proposed by the TPO. Further, the Assessing Officer also asked the Assessee to show cause why deduction for cost allocation should not be disallowed under Section 40(a)(i) of the Act on account of failure to withhold tax under Section 195 of the Act. In response, the Assessee filed reply letter dated 18/03/2005. The Assessing Officer took note of the fact that even before the TPO that Assessee had not furnished original vouchers and had taken a position that there was no agreement for sharing the cost and no invoices we....
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....of the CPA Certificate and allocation keys during the assessment proceedings is factually incorrect. It was submitted on behalf of the Assessee that the TPO and Assessing Officer had applied mind to the CPA Certificate and verified the same during the assessment proceedings. In this regard, we note that it is admitted fact that the Assessee had only filed supporting documents and details for 60% of the cost allocated before the TPO and the Assessing Officer. This becomes clear on perusal of letter dated, 16/02/2005, filed by the Assessee before the TPO in response to notice, dated 25/01/2005 [placed at Page 145 to 152 of the Factual Paper Book]. In paragraph 37 of the order, dated 15/03/2024, passed by the Tribunal, the relevant extract of the aforesaid letter has been reproduced by the Tribunal. The aforesaid position is also apparent from the submissions on Ground No.2 filed by the Assessee before CIT(A) placed at Page 219 to 227 of the Factual Paper Book filed by the Assessee. The relevant extract of the aforesaid submission reads as under: "9. Reasons for Disallowance by the AO are as under: a) The Assessing Officer has held that the entire amounts are in the ....
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....ance of Rs. 34.97 crores on the basis of the transfer pricing adjustment. 1. The Appellant submits that the Assessing Officer (AO) erred in denying the deduction for the cost Rs. 34.97 crores by accepting the findings given in the order u/s. 92CA(3). Further, even TPO erred in treating the ALP for the expenses of Rs. 34.97 crores at 'nil'. 2. The AO/TPO ought to have considered followings: * Of the total expenses incurred by SCB (HO), expenses incurred during the year 2001 which are attributable to the operations carried out in India were allocated at Rs. 76.94 crores. These expenses are directly attributable to its operations in India and hence should be allowed as a deduction. Hence, when the total expenses of Rs. 76.94 crores were allocated to SCB-India (Assessee/ Appellant) on scientific basis and substantiated by audit certificate issued by M/s KPMG Audit Plc - UK there is no reason for AO/ TPO to assume that only expenses of Rs. 41.97 crores yield benefits to Appellant. * The appellant has submitted the details of benefits received by SCB-India branch with reference to entire costs of Rs. 76.94 crores (Refer Annexure 2A). The TPO ha....
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....logy cost, Hong Kong / Singapore Direct cost, the same is dealt with hereunder. xx xx xx xx ✓ Such costs are allocated to India operation and the bases of allocations are certified by KPMG. Even the AO/TPO have accepted such basis of allocation since they have accepted part of such allocated cost. ✓ Benefits derived by Appellant with reference to entire expenses were explained to the AО/ТРО. * Hence, it is submitted that the action of AO/ TPO to treat ALP for part above referred expenses at 'nil' is baseless. The entire expenses are attributable to Appellant's operations in India and the same should be allowed as a deduction. 4. Benefits to the Appellant xx xx 5. The Appellant submits that the action of TPO of not accepting ALP of entire expenses of Rs. 76.94 crores is not tenable, particularly when the Appellant had substantiated the expenses of Rs. 41.97 crores, which is more than 60% of the total expenses, by filing various contemporaneous evidences and details, and such details demonstrated the benefits derived by the Appellant, as has been accepted by the T....
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.... CPA Certificate furnished by the Assessee. Further, perusal of Assessment Order clearly shows that the TPO/Assessing Officer had clearly taken a stand that in absence of relevant documents/details the benefit derived from the Indian operations could be determined and therefore, benchmarking of cost allocation could not be done. Thus, we reject the contention of the Assessee that the authorities below had verified the CPA Certificate furnished by the Assessee for benchmarking the cost allocation. The finding returned by the Tribunal that the authorities below had not taken cognizance of the CPA Certificate is supported by the material on record which has been referred to by the Tribunal in its order. 5.9. Further, a perusal of the submission field before the CIT(A), reproduced in paragraph 5.7 above also shows that the Assessee had submitted before the CIT(A) that the action of TPO of not accepting ALP of entire expenses of INR.76.94 Crores was not tenableas as the Assessee had substantiated the expenses of INR.41.97 Crores, which is more than 60% of the total expenses, by filing various contemporaneous evidences and details, and such details demonstrated the benefits derived by....
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....ank's allocation policy which has been determined by the directors of the Bank. Under the terms of our engagement letter, our responsibility is to form an opinion on whether the aggregate costs of the Bank as shown on the attached Schedules have been accurately extracted from the books and records kept by the Bank and have been allocated in accordance with the Bank's allocation policy, on the basis of the work performed, and report to the Bank. Our report has been prepared for the Bank solely in connection with the completion of Standard Chartered Bank India Branch local tax return. It has been released to the Bank, on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Bank's own internal purposes) or in part, without our prior written consent. We hereby consent that the Bank make available our report to the Deputy Director of Income Mumbai India. xx xx We have examined the records of the Bank and carried out such tests and received such explanations from management, as we consider necessary work we have performed is to enable us significantly less in scope than an audit and hence provides ....
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.... We have already rejected the submission of the Assessee that the authorities below had taken cognizance of the CPA Certificate. In our view, the authorities below did not object to the allocation policy or computation of cost allocation solely for the reason that the contention of the Assessee that the cost allocated resulted in benefit to Indian operations/branch was rejected at the threshold by the authorities below on account of failure of the Assessee to furnish supporting documents. Vide order dated 15/03/3024, the Tribunal had accepted the contention of the Assessee that the entire cost allocation cannot be rejected on account of non-submission of original vouchers and agreement/invoices, and thereby provided another opportunity to the Assessee to establish that the cost allocation was at ALP. Equity also required that Revenue should also be granted opportunity to verify the allocation/computation of the cost said to have been incurred outside India for the purpose of Indian operations. Thus, we reject the contention of the Assessee that the directions issued by the Tribunal in paragraph 56 of the order, dated 15/03/2024, constituted mistake apparent on record. Further, befo....